ECN broker commission. How to calculate it?

ECN broker commission? How to calculate it? At a time when Market Maker (MM) brokers dominated the currency market, everything seemed simpler. It was not necessary to know the market mechanisms, how to settle transactions, and even transaction costs were clearly defined in advance and did not require any conversion. It was better, but worse. ECN brokers revolutionized the retail Forex market and introduced a new quality of brokerage services. They also introduced transaction commissions, which they do not add to the spread value as in MM brokers.

Commission rates

ECN brokers charge their commission (from Commissions) expressed as a percentage of the transaction value when it comes to its implementation. The commission is charged on both opening and closing positions. This is because closing the market position ECN is accounted for as opening the opposite position, which balances the balance of the account and only the difference resulting from the levels of orders is added. So de facto two transactions follow one position.

The most frequent rate among Polish ECN brokers is the value of 0,0045%, which is the amount taken by the broker from the value of a single transaction. The value of the transaction depends on the base currency and the transaction volume.

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ECN commission - how to calculate it?

The base currency is the first in pair, i.e. for EUR / USD it will be euro and for USD / CHF it will be US dollar. The transaction volume is usually expressed in lots, where 1.0 lot is the transaction value of 100 units of the base currency, i.e. EUR / USD 000 and USD / CHF USD 100. Simple math remains:

1. 100 000 EUR * 0,0045% = 4,5 EUR
2. 100 000 EUR * 0,0045% = 4,5 USD

We will pay so much for opening the position. The second one will be collected for closing it. If we run an account in a different currency than the base currency of the concluded transaction, it is enough to multiply these values ​​by the current exchange rate. In case the account is in PLN it will be:

1. 4,5 EUR * 2 (opening + closing) * 4,20 (EUR / PLN adopted for calculations) = 37,8 PLN
2. 4,5 USD * 2 (opening + closing) * 3,20 (the USD / PLN exchange rate used in the calculations) = 28,8 PLN

You can still translate it into pips.

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Assuming the above values ​​and currency pairs, this will be:

1. PLN 37,8 (commission value) / 3,20 (USD / PLN exchange rate - 1.0 pip = USD 10 on EUR / USD 1.0 lot) = USD 11,81 or 1,18 pips.
2. PLN 28,8 (commission value) / 3,50 (CHF / PLN exchange rate - 1.0 pips = CHF 10 for USD / CHF 1.0 lot) = CHF 8,23 ​​or 0,82 pips.

The above calculations are only examples and may vary depending on changes in exchange rates, commission rates and transaction volume!

Cheaper on MM? None of these things

It may seem like brokers Market Maker they are cheaper because they only download spread. It is true that spread is the only fee. However, the broker commission is calculated in this spread. In the case of ECN, we have a purely market spread, which depends on the liquidity on the financial instrument at the moment. The greater the liquidity, the smaller the difference in rates. Consequently, in most cases the total transaction cost is lower with the ECN broker.